Role of The Controller - Mike Allred Associate Vice Chancellor for Finance & Controller UC-Davis doc

Associate Vice Chancellor for Rick Catalano Director - Internal Audit Finance Services Controller ERWG B | a of my: | 22 Distinct, Yet Complementary ¢ Ownership of systems of ¢

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Role of The Controller

Mike Allred

Associate Vice Chancellor for Finance & Controller

UC-Davis

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Berkeley—John Ellis

Irvine—Rich Andrews

Controllers? Merced—Steven Dolmseth

Riverside—Bobbi McCracken

San Diego—Don Larson

San Francisco—Susan Lin Santa Barbara—Jim Corkill

Santa Cruz—Kirk Lew ANR—Jake McGuire

LBNL—Jeffrey Fernandez

Organizational Independence

and Cooperation

Abbreviated Organization Chart

Larry N Vanderhoef Chancellor Vice President- University

Management

Stan Nosek John Meyer Vice Chancellor for Vice Chancellor for Resource Administration Management & Planning

Mike Allred Associate Vice Chancellor for Rick Catalano

Director - Internal Audit Finance Services (Controller)

ERWG

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Distinct, Yet

Complementary

¢ Ownership of systems of ¢ Independent evaluation of

accountability and control systems of accountability

and control

¢ Provide leadership to ¢ Provide a resource to

management in recognizing management in helping

control responsibilities and assess their control

understanding control and environment, and the

of operations

¢ Ensure improvement ¢ Evaluate effectiveness of

initiatives receive improvement initiatives, and

management support and communicate results to

provide accountability for stakeholders

progress, with reporting to

stakeholders

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Roles & Responsibilities of UC a

Controllers

Established by the UC Controls Initiative

— Provide leadership and direction for implementation of the

initiative across the campus

— Responsible for the quality of controls in areas directly

reporting to them, and will assist other campus management

in their responsibilities to ensure appropriate controls for

other campus operations

Develop and implement campus wide system of

internal control

Establish, evaluate and support control environment

Provide financial leadership focus for campus

operations

UC Accounting Program

¢ UC maintains and operates a comprehensive

accounting program in order to:

— Meet its stewardship responsibilities

— Provide management information to all levels of the

University’s administration, as well as State and

Federal officials

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UC Accounting Program

¢ The University has a special stewardship

obligation to:

— Process properly and accurately all receipts and

disbursements of funds

— To account for all financial resources received and

used

— To ensure that all financial transactions conform to

legal requirements and administrative policies, and are

recorded in accordance with GAAP

— To provide reports that present a complete picture of the University’s funds and their uses

UC Accounting Program

¢ The University’s comprehensive

accounting program must provide financial information to all levels of University

administration for:

— Use in planning and budgeting

— Evaluating the uses of funds

— Making comparative studies

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UC Average Daily Expenditures

UCD 8,114,754

DOE Labs 16,144,942

Source 2005-06 Campus Financial Schedules (current funds only)

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¢ Are we doing a good job?

— Annual Audit Report from UC’s External ie

Auditor (PwC) >

¢ Required Communications to the Regents’

Committee on Audit

¢ Letter of Comments & Recommendations to the Regents

¢ Letter of Comments & Recommendations to the

Chancellor

— Reports to the Board of Regents from Internal

Audit

— Audits published by agencies that sponsor UC

activities

¢ HHS-OIG, NSF-OIG

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Does anyone care about University

Accounting?

As Universities Get

Billions in Grants,

Some See Abuses

Cornell Doctor Blows Whistle

Over Use of Federal Funds,

Alleging Phantom Studies

Defending a Star Professor

By BERNARD WYSOCKI JR

Staff Reporter of THE WALL

STREET JOURNAL

August 16, 2005; Page Al

University of California

House Panel Urges

Probe

Of Use of NIH Grants

By BERNARD WYSOCKI JR Staff Reporter of THE WALL STREET JOURNAL September 22, 2005; Page A4

Timeline of Accounting and Investment

Regulation

1914 Federal Reserve created as the nation’s first bank

1923 GM adopts major accounting —— ee id other big businesses

— ROI, ROE, Flexible Budgeting

1929 Stock Market Crash

1933/34 Passage of Securities Acts

— Creation of SEC

- SEC reporting requirements (10Q and 10K) 9 pa Se=——

1936-38 The Committee on Accounting Procedure (CAP)

was created

— GAAP used for the first time

1953 CAP issued first GAAP codification

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Timeline of Accounting and Investment

Regulation

1959 Accounting Principles Board (APB) was

formed to replace CAP

1973 The Financial Accounting Standards Board

(FASB) was formed to replace APB

1984 The Governmental Accounting Standards

Board was organized by the FAF

2002 Passage of the Sarbanes-Oxley Act s

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Sarbanes-Oxley Act of 2002

« Passed by Congress to help restore investor

confidence in the financial markets in the wake of

Enron, Tyco, Global Crossing, WorldCom,

HealthSouth

Created a new accounting oversight board to police the

practices of the accounting profession

Strengthened auditor independence rules

Increased the accountability of corporate officers and

directors

Improved disclosure and financial reporting

Influence of Sarbanes-Oxley Act on UC

¢ PwC Report to the Regents 2002-03

— Recommendation by PwC to implement build-up certifications to support campus representation letter process

¢ Implementation

— 2003-04

¢ Research, Student Financial Aid, Development

(Pledges)

— 2004-05

¢ Fiscal-Year-End Certification Letter

— Signed by all Deans, Vice Chancellors and Vice Provosts

— 22 Signatories at UCD for 2004-05

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Influence of Sarbanes-Oxley Act on UC

FYE Certification Letter

> Representations made by signatory to Controller:

Responsible for the applications of University P&P

Responsible for establishing & maintaining an effective

system of internal control

No material transactions, accounts or agreements that

have not been properly recorded in campus accounting

records

Communications from regulatory agencies, donors, or

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2

All known allegations of fraud or suspected =

Management of funds in compliance with laws, <A

d

regulations, C&G agreements, and donor Z_

a restrictions

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UC Statement of Ethical Values

¢ We are committed to:

— Integrity

¢ We will conduct ourselves with integrity in our dealings with and on behalf of the University

— Excellence

¢ We will conscientiously strive for excellence in our work

— Accountability

¢ We will be accountable as individuals and as members of this community for our ethical conduct and for compliance with applicable laws and University policies and directives

— Respect

¢ We will respect the rights and dignity of others

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UC Standards of Ethical Conduct

1 Fair Dealing

e — No unlawful practice or a practice at odds with

these standards can be justified on the basis of customary practice, expediency, or achieving a

“higher” purpose

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UC Standards of Business Conduct

« All those engaged in research are expected to

pursue the advancement of knowledge while meeting the highest standards of honesty, accuracy, and objectivity They are also expected to

demonstrate accountability for sponsors’ funds and

to comply with specific terms and conditions of contracts and grants

Research Noncompliance in Higher

Education

Cost of Not Doing the Right Thing

University of Pennsylvania Children’s

East Carolina University (2004) 2.3M

Harvard/Beth Israel Deaconess

Thomas Jefferson University (2000) 2.6M

$56.2M

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Research Noncompliance in Higher

Education

Allegations Made Against the Institutions Lack of accounting integrity ¢ Ineligible researchers

Improper use of animals ¢ Improper treatment of human

Cost Transfers — Incorrect False statements in reports

Improper Salary Expenses Failures in Integrity of

Inaccurate Effort Reporting Over billing

UC Standards of Business Conduct

9 Internal Controls

All members of the University community are responsible for internal controls Each business unit or department head is specifically responsible for ensuring that internal controls are established, properly documented and maintained for activities within their jurisdiction Any individual entrusted with funds, including principal investigators, is responsible for ensuring that adequate internal controls exist over the use and accountability of such funds

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SAS 112

¢ Statement on Auditing Standards

— Communicating Internal Control Related

Matters Identified in an Audit has conformed the evaluation standards of control

weaknesses of private companies and

organizations with those of public companies subject to Sarbanes-Oxley and PCAOB audit

standards

— Effective date for UC is July 1, 2006

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SAS 112

¢ Under SAS 112, the standard for

determining when a control issue is either

a significant deficiency or a material

weakness has been tightened

considerably

¢ Three categories of deficiencies:

— Control deficiency

— Significant deficiency

— Material weakness

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SAS 112

¢ System-wide meeting on October, 2006

to develop implementation plan

— Each Campus, Lab & Medical Center to meet

with PwC to agree on:

¢ Inventory of key controls

— Document and ensure key controls are in place

¢ Known control issues

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How will we meet these standards?

¢ By building strong relationships

— Improve communication

¢ Formal & informal

— Teamwork

— Include Deans, Dept Chairs,

Faculty

e This is not a one person job!

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How will we meet these standards?

A Vision to Stimulate Initiatives

Communication of Business & Infrastructure

Requirements

Strategies to Increase Staff Productivity

A Context for Setting Priorities

eee 2010 a; fr

architecture

http://uc2010.ucsd.edu/nbarch/index.htm fo r the Univer Cải of Cali fo rnia

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New Tools, New Methods

¢ Enterprisewide Risk Work Groups

¢ Committee on

Accountability and

Controls

¢ Control Self-

Assessment

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Six Key Componenis

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Lets Work Togetherl